From offline to online and back again – you could be forgiven if the whole internet business is giving you a headache. The last two decades have been a migration to the online sphere, and now it looks like the next two might be a movement back to brick a and mortar. Here’s why it’s happening:
More online businesses are moving offline
With Amazon opening brick and mortar stores, alongside brands like Birchbox and Nasty Gal, there’s a seeming movement back to offline business. But don’t be fooled – this is not simple reversion to earlier days. To be precise, what we’re seeing is not so much a return to traditional brick and mortar retail, but evolution into a more holistic model of commerce. In other words, we’re reaching the point where the word “ecommerce” will soon just be commerce. We’re getting rid of a binary view, in which retail is (artificially) divided into “online” and “offline”. Consider, for example, the new Singapore Post Centre (SPC). Owned by SingPost but managed by CapitaLand, this will be the largest ecommerce mall in South East Asia once it opens. The concept it’s embracing is an omnichannel approach – one in which customers can shop online or offline for the products they want, the way they want. For example, imagine ordering a sweater online, but also being able to drop by the store to try on different sizes before taking it home. That eliminates the process of having to resend the item, and wait for a replacement.
Here are five other key reasons businesses expand to the offline sphere:
- It fills a gap between offline and online shopping
The gap exists between browsing, and the actual point of sale. For example, a purely offline business cannot cater to 24/7 browsing needs. If the shopping bug gets you at midnight while you’re in your pyjamas, or bored on a bus, online shopping lets you indulge in the need to shop or buy – even if all the stores are closed. However, what online shopping struggles with is the point of purchase. For some times, such as clothes, musical instruments, or cosmetics, you really need to try before you buy. It’s hard to tell how good a particular lipstick will look on you, when it’s an image on your phone. Online tailor Bonobos, for example, uses its physical stores only to take measurements, and offer style advice. They do not stock any actual product in the store (which saves costs). The actual purchase is made online, and delivered to the customers’ home. The idea behind merging online and offline spheres is to close this gap – you can browse and shop anytime you want, but you can also touch, feel, and experience the product.
- In the near future, the online space may be as crowded as the offline space used to be
Running an online business is becoming more expensive. It was cheap in the early 2000’s, when there were comparatively few online retailers, who all had a share of the pie. Today, thousands of new online retailers (and hence competitors) can appear within the span of a day. This drives up the expenditures on content marketing, keyword bidding, sales promotions, and other operating costs. In particular, it’s tough for small businesses to compete with dominant names, such as Amazon, for visibility. This is one reason for the recent trend of pop-up stores: it allows new businesses – even if they are predominantly online – to raise awareness outside of an increasingly crowded digital space. There’s a real irony at work here: once, online content was used to raise awareness of physical stores. Today, physical stores are used to raise awareness of online shops. There may come a day when opening a physical store for a short time (e.g. a single year) proves cheaper than bidding for keywords and operating another blog.
- The buying ecosystem
Most retail businesses these days aim for a seamless “ecosystem” of products. To use an example, consider celebrity chefs such as Jamie Oliver or Gordon Ramsay: Their cookbooks promote their television shows, while the television shows also promote the cookbooks; and both the shows and the cookbooks promote their restaurants (and a visit to the restaurant will prompt you to look up their cookbooks and shows, and so forth). The result is an interlinked network of products, all promoting one another, while also being sources of revenue. For online businesses, going offline is just a way to expand the ecosystem. Amazon’s physical bookstores can be used as venues to promote the Kindle, and the Kindle itself can promote Amazon’s bookstores (e.g. discounts in the physical store, for those who have bought certain Kindle e-books, and vice versa).
- For some markets, going offline first might be a better strategy
Some emerging market economies are still new to ecommerce. While the population is growing more affluent, and internet access is improving, they may still prefer to buy from online stores. This can be seen in many Southeast Asian countries, which in the early 2000’s were still not used to online retail. Some companies aim to move into these markets via traditional offline stores first, to build brand recognition and trust. As these countries develop in the digital sphere, customers from their brick and mortar stores are more likely to seek them out online, as opposed to purely ecommerce brands they’ve never heard of before.
- If you’re focused on cross-border selling, brick and mortar becomes a “may as well” issue
As online businesses go international, physical stores are a natural development. This is due to simple logistics. Rather than supplying, say, 40 different countries from the same distribution hub, it makes better sense to decentralise. Each region may have its own distribution hub, for instance, and particularly active cities may deserve their own distribution outlets. As this involves hiring staff and renting space, the development into brick and mortar stores becomes a “may as well” scenario. If you’re going to need a warehouse in Bangkok because of the volume of sales there, why not just open a store there? Not only can the store serve to hold inventory, it can generate sales through foot traffic, and raise brand awareness outside of Facebook. It also carries the same advantages we mentioned in point 1.
Don’t neglect what brick and mortar can do for your business
Given Singapore’s high rental costs, it’s easy to scoff at brick and mortar stores. But don’t be too quick to dismiss them – our well managed network of malls, from Orchard road to heartland areas, still offer a lot of retail opportunities. Before you make your move however, be sure to talk to one of our business solutions experts. At Synagie.com, we provide key analytics that help you determine when the time is right. Our system helps you identify what customers are buying geographically, as well as behavioural analysis on buying patterns and key trends.